To anyone born before 1980, the idea that the state would own a large part of the economy was normal. The ‘mixed economy’ was a typically British compromise between American cut-throat capitalism and the incompetent communism beyond the Iron Curtain — or at least a compromise between the socialist leanings of the Labour Left and the free-enterprise mantra of the Tories. Such was the tug-of-war of ideologies that the British steel industry found itself nationalised in the 1940s, returned to the private sector in the 1950s, re-nationalised a decade later and re-privatised in the 1980s. Yet despite so much of the rest of the UK economy falling into public hands over the past half century, banking has until now escaped.
Apart from the formality of nationalising the Bank of England in 1946, the Square Mile remained a state-free zone despite the best efforts of the Left to storm the bastions of capital. The original Fabian, Sidney Webb, thought nationalising the ‘means of exchange’ would give him the sorcerer’s stone; a Labour Green Paper before the 1973 secondary banking crisis called for bank nationalisation; Harold Wilson, as leader of the opposition, proposed a state-owned merchant bank. In 1976 his party demanded nationalisation of one merchant bank, four clearing banks and seven insurance groups. But prime minister Callaghan dismissed the idea as an ‘electoral albatross’. His successor as Labour leader, Michael Foot, proved the point by including bank nationalisation in his disastrous 1883 election manifesto.
It has taken Britain’s most centralist Labour government ever to do what its socialist predecessors failed to do. Having had Northern Rock as a canapé, it has swallowed Bradford & Bingley as an hors d’oeuvre and carved off huge slices of the biggest high-street banks for its main course.
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